Micro, small, and medium-sized enterprises (MSMEs) in the Philippines continue to face financing challenges despite contributing more than one-third to the country's gross domestic product (GDP), according to the Asian Development Bank (ADB).

Data from the Bangko Sentral ng Pilipinas (BSP) showed that bank lending to MSMEs reached P572.74 billion as of end-June. This represents 4.48% of the local banking sector’s P12.8-trillion loan portfolio, a slight decrease from 4.53% in the previous quarter. The figure remains below the 10% requirement for banks mandated under the Magna Carta for MSMEs, which requires an allocation of 8% to micro and small enterprises and 2% to medium-sized businesses.

Suhail Khan, ADB Director of the Private Sector Financial Institutions Division, stated that the national figures conceal a deep regional financing gap and that many viable enterprises remain underserved.

• 70% of firms reported expanding financing through equity and retained earnings.
• Smaller firms often lack conventional collateral, audited accounts, long operating histories, and formal credit records.
• Many enterprises face short loan tenures that do not match investment needs.

Khan noted that women entrepreneurs own approximately 66% of existing MSMEs, but research indicates women-led firms are less likely than male-led firms to hold bank accounts and substantially less likely to receive loan approval.

“The Philippine financing gap is not only about volume of credit. It is also about geography, tenure, collateral, data, product design and the persistent barriers faced by entrepreneurs, particularly women entrepreneurs,”

To address these gaps, Khan suggested the implementation of longer tenures, revolving working capital, moveable asset lending, risk-sharing facilities, and the use of guarantees to encourage lenders to enter new regions. In February, the ADB signed a $30 million loan to Fuse Financing Inc. to expand MSME access through a digital lending platform intended to serve farmers, market vendors, and sari-sari store owners.